Alan Blinder

Professional life

Academic career

Blinder is the Gordon S. Rentschler Memorial Professor of Economics and Public Affairs at Princeton where he has been since 1971; from 1988 to 1990, he chaired the economics department. Also in 1990, he founded Princeton's Griswold Center for Economic Policy Studies. And he has served as vice-chair of The Observatory Group.

Since 1978, Blinder has been a Research Associate of the National Bureau of Economic Research. He is a past president of the Eastern Economic Association and Vice President of the American Economic Association and was named a Distinguished Fellow of the latter in 2011. He is a Fellow of the American Academy of Arts and Sciences (since 1991), a member of the American Philosophical Society since 1996, and a member of the board of the Council on Foreign Relations (since 2008). Blinder's textbook Economics: Principles and Policy, co-written with William Baumol, was first published in 1979 and, in 2012, was printed in its twelfth edition.

In 2009, Blinder was inducted into the American Academy of Political and Social Science, "for his distinguished scholarship on fiscal policy, monetary policy and the distribution of income, and for consistently bringing that knowledge to bear on the public arena." He is a strong proponent of free trade. Blinder has been critical of the public discussion of the US national debt, describing it as generally ranging from "ludicrous to horrific".

Political career

Blinder is listed among the most influential economists in the world according to IDEAS/RePEc.

In 1975, Blinder served as the Deputy Assistant Director of the Congressional Budget Office.

In the 1990s, he served on President Bill Clinton's Council of Economic Advisers from January 1993 to June 1994, and as the 15th Vice Chair of the Federal Reserve from June 27, 1994, to January 31, 1996 (more specifically as the Vice Chairman of Board of Governors of the Federal Reserve System).

As Vice Chairman, Blinder cautioned against raising interest rates too quickly to slow inflation because of the lags in earlier rises feeding through into the economy. He also warned against ignoring the short term costs in terms of unemployment that inflation-fighting could cause.

Many have argued that Blinder's stint at the Fed was cut short because of his tendency to challenge chairman Alan Greenspan. By challenging assumptions, Blinder supposedly disrupted "the whole pipeline of Greenspan-arriving-at-decisions."

He was an adviser to Al Gore and John Kerry during their respective presidential campaigns in 2000 and 2004.

Private sector

Blinder was a co-founder and a vice-chair of the Promontory Interfinancial Network, LLC.

After his service as the vice chairman of the Federal Reserve, Blinder, along with several former regulators, founded a company that offers a number of services that provide a means for depositors (including governmental entities, nonprofits, businesses, as well as individuals such as retirees) to access millions in Federal Deposit Insurance Corporation (FDIC) coverage at a single institution instead of multiple ones. This provides banks that are members the ability to offer coverage above the FDIC per account/per bank limit by letting those banks place funds into CDs or deposit accounts issued by other network banks. This occurs in increments below the standard FDIC insurance maximum ($250,000) so that both principal and interest are eligible for FDIC insurance. The company acts as a sort of clearinghouse, matching deposits from one institution with another. Through its services it allows access to higher levels of FDIC insurance although limits apply.

"Cash for Clunkers"

Blinder was an early advocate of a "Cash for Clunkers" program, in which the government buys some of the oldest, most-polluting vehicles and scraps them. In July 2008, he wrote an article in The New York Times advocating such a program, which was implemented by the Obama administration during the summer of 2009. Blinder asserted it could stimulate the economy, benefit the environment, and reduce income inequality. The program was praised by President Obama for "exceeding expectations", but criticized for economic and environmental reasons.

Great Recession of 2008 and 2009, and slow recovery

The Great Recession started in December 2007 and bottomed-out in June 2009, at which point the U.S. economy began a slow recovery. Blinder points out that payroll employment didn't regain its previous level until almost five additional years.

Blinder argues for 10 lessons for fellow economists, including —
4)"Self-regulation is oxymoronic."

5) "Fraud and near-fraud can rise to attain macroeconomic significance."

6) "Excessive complexity is not just anti-competitive, it's dangerous."

" . . no one knows what these securities are really worth. ."

Regarding the teaching of college-level economics, Blinder writes, "If you are not teaching your students that 'Keynesianism' is neither conservative nor liberal, you should be."

Economic models with one interest rate — "the" interest rate — are no longer good enough. He writes, "After all, in the 2000s we saw several dramatic instances of risk spreads first narrowing dangerously, then skyrocketing once fear took over from greed, and then narrowing again as calm returned."

For a beginning class in economics, he recommends including QE, or Quantitative Easing, as practiced by the Fed. He also favors including that investment bubbles can and do occur, and that "leverage is a double-edged sword."

Regarding other concepts such as "Too Big To Fail," Blinder recommends including them in advanced courses but not in introductory classes. He thinks the early class(es) should include material which economists largely agree on, the "received wisdom" as it were, although he sees how other teachers might come to different conclusions.

Most people care more about their jobs than cheap consumer goods?

In a 2019 article entitled "The Free-Trade Paradox: The Bad Politics of a Good Idea," Blinder states that the main focus of the economics profession has been using price signals to produce goods and services as cheaply as possible. Jobs are viewed as secondary, and often as a distinct negative which people put up with only to get the money for their own consumption.

But then he asks, "What if people care as much (or more) about their role as producers — about their jobs — as they do about the goods and services they consume? That would mean economists have been barking up the wrong tree for more than two centuries."

He still thinks there's an excellent case to be made for free trade, just not the case which economists typically make.